Palestinian Economy Is Near Collapse, Study Finds

Author: calcalistPosted October 30, 2012

Last Saturday [Oct. 13], I visited a folk festival in the [West Bank Palestinian] Christian village of Taybeh, east of Ramallah — not to be confused with the Arab city [of Tayibeh] within the Green Line. The village of Taybeh is known primarily thanks to the beer-producing Taybeh Brewery, which is marketing to Israel as well and is quite popular in some of the pubs in the country. [As said,] the village of Taybeh should not be confused with the Arab city by the similar name located within the Green Line.

Summary⎙ Print The Palestinian economy is on the verge of collapse, according to a study by an Israeli economist. Danny Rubinstein reports that public-sector salaries account for more than a quarter of Palestinian's spending, and those salaries are not being paid on time.

The Palestinian Police were present on the scene, to maintain law and order during the various events of the festival. A police sergeant standing next to me complained that he and his colleagues had not yet received their September wages, although it was already almost mid-October. He is 28 years old, a native of a village in the environs of [the Palestinian town of] Jenin; he is married and has two children. He is serving in Ramallah and lives in a tiny rented apartment in the [Ramallah] suburb of Bitunya. He earns 2,500 shekels [just about $660] per month. The rent costs him 800 shekels [around $211] a month and he has to make do with what's left to meet his family's basic subsistence needs. After some more small talk, he feels that he can trust me and embarks on a tirade against the Palestinian [Authority] seniors who, he charges, are stealing the money [of the hard-working poor], leaving him and his fellow men practically nothing. You can hear talk like that on every street corner in the West Bank.

The [Palestinian] public-sector employees account for [more than] a quarter of the Palestinian purchasing power

For the best part of the past 16 months, the Palestinian Authority failed to pay on time the wages of more than its 200,000 public-sector employees. The delays in salary payments are caused by delays in the transfer [to the Palestinian Authority] of emergency aid funds and Palestinian tax revenues collected by Israel on behalf of the Palestinian Authority. The economic implications of the situation are far-reaching and disastrous, argues economist Yitzhak Gal in a report prepared by him for the monthly e-newsletter Iqtisadi (September issue, published by the Tel Aviv University Moshe Dayan Center for Middle Eastern and African Studies [under the heading "The Palestinian Economic Crisis: A Loud Wake-Up Call"]). The situation is liable to have dangerous [social and political] consequences due to the fact that the Palestinian public-sector employees, including the security establishment personnel, account for [well] over a quarter of the Palestinian purchasing power. Their low salaries are a mainstay of economic and social stability in the West Bank. “As these salaries have not been paid on time and in full,” the report explains, "the economic security of the public-sector employees is undermined “and the shock waves spread to the West Bank society at large.” Furthermore, [many of] these public-sector employees are unable to meet bank loan repayments and the devastating effect is felt throughout the financial system.

The purported economic growth has been nothing but a fleeting mirage

Wage levels in the Palestinian territories are evaluated with reference to the purchasing power and standard of living of the local inhabitants. The close ties with the Israeli market are reflected in similar price levels in the West Bank and Israel, in particular when it comes to the price levels of fuel, communication services and a whole array of basic food products. [Since wages in the Palestinian territories are much lower than in Israel,] the real purchasing power of Palestinian households is much lower than that recorded in Israel. Comparisons of related international data conducted by Gal show that the Palestinian GDP [gross domestic product] per capita [when adjusted to local purchasing power] is far lower than that of neighboring Arab counties, and is only slightly higher than that of the poorest countries in the region. In other words, the Palestinians' standard of living and poverty level are similar to those found in countries like Sudan or Yemen. In view of these findings, the report warns that the economic crisis in the Palestinian Authority is “A Loud Wake-Up Call.”

The economic growth witnessed in the territories since the Second Intifada waned [in 2004] has been nothing but a fleeting mirage, as it followed a deep recession and was exclusively based on international aid funds. However, in recent years the external financial support to the Palestinian Authority has been on the decline, which has further undermined the ailing Palestinian economy, aggravating its structural weakness, that is, the huge gap between the massive imports and the meager exports. As a consequence, the economic crisis [in the Palestinian Authority] is liable to deepen even more and, combined with the political impasse, it may put the economic and social stability of the Palestinian Authority at a risk and threaten its leadership with chaos. As the crisis unfolds, it may well develop into an uncontrollable wave of violent protests and drag Israeli –Palestinian relations back to the all too familiar vicious circle of violent confrontations, terror, stricter Israeli restrictions [on movement and access] and other penalization measures imposed by the Israeli regime, which would further deepen Palestinian destitution and despair and could trigger an even more violent round of hostilities.

Al-Monitor brings together top journalists from across the Middle East. Including Egypt, Iran, Iraq, Israel, Lebanon, Palestine, Syria and Turkey. Plus, we have daily translations from 20 major news organizations in the region.